America:
Still the High-Speed Laggard
By
Sarah Lacy
BusinessWeek Online
Compared
to South Korea, Japan, even Canada, broadband adoption
in the U.S.
is falling behind. For 20% of Americans, it's not even an option. In
the early 1990s, Taylor Reynolds spent time as an exchange student in South Korea -- a good deal of it hunting for a computer on which to write his term papers. "I finally found someone whose sister worked in a preschool, and it had a computer," he remembers. "I had to go in on Saturdays to use it." Reynolds,
now a telecommunications analyst at the Organization
for Economic
Cooperation & Development (OECD), an international
body that researchers the
state of world economies, says South Korea is a far
different place today, with
73% of the population enjoying high-speed Net access
at home. "It was quite a
transformation," he says. However, his parents in Salt
Lake City, Utah, can't
even get a digital subscriber line (DSL) high-speed
Net connection from their
phone company, Qwest (NYSE:
Q
- News
). They're not the only Americans missing out on the broadband boom. Countries like South Korea, Demark, and even Canada are leapfrogging ahead of the U.S. in broadband adoption. Thanks to high costs, very little competition, and the logistical challenges of wiring large metropolitan areas, the U.S. is increasingly losing ground to other countries when it comes to broadband penetration and access. Could
Be Better.
In 2000, the OECD said the U.S. ranked third in Net
users
connecting at high-speed among the top-30 world economies.
The next year it fell
to fourth. Now it's 11th, according to the OECD. And
fast connections in the U.S.
are slower than in many other countries. A top-of-the-line
cable modem in the
U.S. carries five megabits per second, while broadband
connections in Asian countries
like Japan and South Korea are often 20 times faster.
South Korea is, in fact,
the world leader in broadband. And unlike the U.S.,
it has multiple companies
offering most of the country DSL lines that are also
faster than what's available
in the U.S., thanks in no small part to government encouragement and sponsorship. Certainly,
broadband in the U.S. is growing. The OECD estimates
the number
of American broadband subscribers increased 32%, to
37 million, last year. That
places the country well above the average for the 30
largest economies of the
world. And
the
number of broadband connections has finally surpassed
dial-up
. That's not bad. It's
not great, either. About 20% of the U.S. has no way
to get broadband
Net access, and 5% to 10% more only have one choice:
Their local cable-TV provider.
Makes sense then, that while the U.S. ranks 11th in
total broadband penetration,
it ranks 23rd in DSL use (see table,
"Cable:
The Broadband Champ"
.) Blaming Washington.
In fairness, the
U.S. is a big country, and it's an expensive place
to do business. The low labor
costs and small geographies of many Asian countries
allow utilities to offer broadband
at rock-bottom prices, says Vamsi Sistla, director
of broadband research at the
consulting company ABI Research. But that rationale only carries so much weight: Canada is a big country, too, and it doesn't have nearly the geographic advantages of a country like South Korea. Yet nearly all Canadian homes can get a broadband connection, according to online marketing trade publication eMarketer. Many
critics point the finger at Washington for not fostering the kind of competition that has allowed Canada's broadband market to thrive and led France -- not exactly known for fostering capitalist competition -- to boost its broadband penetration from 12% in 2003 to a forecasted 41% next year. If cable companies were forced to open up their lines, over-night 80% of the U.S. would have more than one broadband supplier to choose from. Theoretically at least, that would drive down prices and force companies to offer enticing service packages like phone and TV delivered via the Web. Share the Risk?
It could happen. And
a drama playing out now in the Supreme Court could
help. On Mar. 29, the court
heard arguments between Brand X, a small Santa Monica
(Calif.) Internet service
provider and the Federal Communications Commission.
Brand X is trying to force
the FCC to make cable companies lease their lines to
rivals. Proponents say this
would allow more competition, lower prices, and boost broadband adoption. Opponents,
including the FCC, point to what's happened in the telecom world since the Baby Bells were forced to share lines because the Telecom Act of 1996. They argue that sharing phone lines has only slowed DSL proliferation. It costs billions to upgrade DSL networks, and up to now, phone companies have been reluctant to take that kind of financial risk, saying they shouldn't be forced to share their networks with rivals who didn't put in the upfront money. Based
on that argument, the FCC, in addition to fighting
the Brand X suit, is now mulling whether to allow the
telcos to shut their lines to rivals. "We're seeing
positive signs over the past few months that we'll
have less policy and less regulation," says Shawn Dainas,
spokesman for SBC Communciations (NYSE:
SBC
- News
). "If you're putting in all the risk, why do you have to share with competitors who aren't putting anything into the technology?" Better Wi-Fi Coming.
So if Brand X loses when
the Supreme Court hands down hits ruling, which is
expected this summer, is the
U.S. doomed to keep slipping? Not necessarily. Verizon
Communications (NYSE:
VZ
- News
) has pledged to install fiber-optic lines to 3 million
households by the end
of 2005. It'll offer speeds three times as fast as
cable modems for $49.95 per
month -- the best deal for that speed in the states
so far, says eMarketer. SBC
and BellSouth (NYSE:
BLS
- News
) are also
boosting their networks. And
this summer the WiMax wireless communication
standard will finally be set. WiMax is a faster, more
reliable cousin to Wi-Fi,
promising a strong signal for wireless Internet access
for three to five miles.
It could reach 98% of American homes on just $3 billion
dollars in equipment,
says eMarketer -- far cheaper than laying fiber-optic
cables. Experts say
WiMax
could start gathering momentum by the end of the decade.
The
Net may be faster for most consumers in South Korea,
Denmark, or Canada than
in the U.S. for now. But universal broadband for Americans
is coming one way or
another. Too bad other countries are getting it first. Back
to: The
Broadband
Life | 
